There was recently a controversy among researchers as to whether the rich in Germany suffer more from inflation than the poor. Result: It’s hard to say. Now it turns out that if you take a closer look, you have to think more about another group. The currently high inflation hits families with children in particular – also from the middle class.
For parents with two children who earn 3,600 to 5,000 euros net per month, the individual inflation rate last December was 5.5 percent. That was more than the overall increase in consumer prices of 5.3 percent. Even families with a low income of 2000 to 2600 euros paid a lot. Not so singles: Their inflation rate was lower than the general inflation, no matter how much they earned. This emerges from the inflation monitor that the Institute for Macroeconomics and Business Cycle Research (IMK) is now publishing calculated for the first time has.
“Inflation has skyrocketed in recent months,” says IMK researcher Silke Tober. “Inflation hits households in Germany”. In 2021 as a whole, consumer prices rose by 3.1 percent – the strongest increase in 30 years. “Our results show that the particular burden on families is not a snapshot,” says IMK Director Sebastian Dullien. In 2021 as a whole, the inflation rate for families of four was higher than general inflation, regardless of how much they earned. If one imagines that earnings in households with children have to be distributed among more people than in households without children, the effects in reality are possibly even more serious.
Singles are less affected by rising consumer prices
The European Central Bank is targeting an annual inflation rate of two percent. Because consumer prices rose more sharply in 2021, a middle-income family had additional costs of 550 euros. December alone accounted for 120 euros.
What are families spending more on than before? Mainly for groceries, petrol, heating and electricity. Energy prices in December were 18 percent higher than a year earlier. According to the study, those who heat with oil instead of gas and drive a combustion engine had an even higher individual inflation rate than the average.
High earning singles, on the other hand, spend less of their income on everyday goods such as groceries, but also less on household energy. As a result, they are not hit as hard by rising consumer prices. Low-income singles, on the other hand, often cannot afford a car or vacation, so they are inevitably less affected by inflation. This group also includes many pensioners who no longer want a car or drive little. The price of petrol doesn’t play a big role for them.
It’s different with families: Even those who earn little often have a car and drive a lot to commute to work – and to take the children to daycare or football training. Rising food prices are also having a major impact on low-income families.
Despite their results, the IMK researchers give hope. They expect inflation to weaken noticeably this year. They also calculate that citizens benefited financially from the particularly low inflation in the Corona year 2020. Especially in view of the high energy prices, the question remains whether the government should not help the citizens – and who exactly.
In any case, according to the IMK data, rich households are not disproportionately burdened. The high rate of inflation in the middle class is particularly striking. Inflation hits poorer citizens at a similar rate. They have an additional problem: They mainly buy essential everyday goods and have fewer savings to fall back on.
“If energy costs remain high, the government should act,” says IMK director Dullien. “Many citizens are suffering from the short-term skyrocketing of prices.” In addition to subsidies for low earners, especially those with children, he is therefore campaigning for an instrument that broad sections of the population would benefit from: temporarily reducing the value added tax on energy, as suggested by the long-standing economist Peter Bofinger. That would save households 270 euros a year on the gas bill alone.